Companies ordered 43% fewer semi-trucks in December 2018 year-over-year, according to ACT Research. A slump in truck orders typically forebodes an economic turndown because it shows retailers and manufacturers plan to move fewer goods. But four trucking insiders told Business Insider that they still have a rosy outlook for freight in 2019. 2018 was a…

Companies ordered 43% fewer semi-trucks in December 2018 year-over-year, according to ACT Research.

A slump in truck orders typically forebodes an economic turndown because it shows retailers and manufacturers plan to move fewer goods.

But four trucking insiders told Business Insider that they still have a rosy outlook for freight in 2019.

2018 was a red-hot year for trucking, and 2019 is forecasted to be a smaller, but still healthy, market.

The industry will cool slightly in the second half of the year.

The last few weeks of December were tumultuous times on the market — to put it lightly. Christmas Eve saw the deepest plunge in stocks in that day’s history, indicating that the Dow and S&P 500 would have its worst performance in 2018 since the financial crisis.

Two days later, markets shot up for its best day in a decade, only to slump again the day after.

Issues seem to be arising in trucking, too

New truck orders plunged by 43% in December 2018 year-over-year, according to ACT Research. Orders sank last month by 24% from November 2018. Cancellations were also higher than expected, according to a note by Morgan Stanley freight analysts. That ends 2018, one of the hottest years in trucking, on a sour note and appears to foretell trouble in 2019.

A dip in truck orders is particularly foreboding as it indicates manufacturers are producing less and that retailers assume they’ll be moving fewer goods in the coming months. Steve Tam, vice president of ACT Research, called truck orders a leading indicator.

“Because trucking participates in all phases of manufacturing, it increases as manufacturing starts to ramp up, giving it leading indication on economic growth,” Tam told Business Insider.

Still, trucking analysts mostly have a cheery outlook for 2019

Tam of ACT Research said he forecasted that 335,000 trucks will be produced in 2019, up 5% from 2018’s production of 320,000.

“A lot of the predictions are maintaining that there will be some momentum coming out of 2018 and seeing if it can hold in 2019,” Michael DiCecco, who is executive managing director of Huntington Bank’s asset finance sector, told Business Insider. Part of Huntington’s $6.5 billion asset finance business includes lending to trucking companies to buy new trucks and equipment.

Morgan Stanley freight analysts wrote that year-over-year orders in 2019 will sink below 2018’s record numbers. But analysts like Tam said production will increase. The industry is expected to be healthy in the first half of 2019, then cool.

“Company executives may slow from a flat out sprint to a jog, but they might not stop or start walking backwards at this point,” Tam said.

Orders are down because the production backlog is severe

As 71% of America’s freight is moved on trucks, the fact that companies foresee that they’ll need fewer trucks is typically an omen for an economic downtown.

But there’s one explanation for why orders are down that doesn’t spell economic doom. So many companies ordered trucks last year that there’s a huge backlog of trucks. Those transportation companies are still waiting for their orders, and understandably not ordering more.

DiCecco said freighters are waiting seven to eight months for truck orders — even though they take only 10 weeks to produce in a normal circumstance. In the third quarter of 2018, the wait was as long as a staggering nine months.

Tam said there’s around 300,000 orders in the backlog. In a normal year, that’s around 80,000 to 100,000 units.

Matt Cardy/Getty Images

Watch out for production slowing

Because of healthy truck production numbers, insiders like Don Ake, vice president at freight-equipment research group FTR, are doubting there will be a devastating slowdown in trucking or the economy as a whole in 2019. The industry will cool slightly in the second half of the year.

“Right now, if somebody came to me and said to me, ‘Hey, these people are saying recession in 2019,'” Ake told Business Insider, “I’m going back to numbers from the equipment market and I’m going to say, ‘No recession in 2019 under normal circumstances.'”

If production slows, though, Ake said he’ll start to to “watch the economy like a hawk.”

“That means that there could be a significant change on the way,” Ake said.